Japanese auto-component maker JTEKT Corporation is set to buy out Indian partner Sona Group’s 25% stake in Sona Koyo Steering Systems for Rs 575-625 crore, ending their 32-year-old partnership, two people familiar with the development told ET.
JTEKT is believed to have offered the Kapur family, which owns the Sona group, Rs 115-125 per share, valuing the joint venture company at Rs 2,300-2,500 crore, a more than 50% premium over its current capitalisation of Rs 1,450 crore.
Sunjay Kapur, the former husband of actress Karisma Kapoor, is the chairman of Sona Koyo and his father Surinder Kapur was the founder chairman of the company.The Sona Koyo Steering Systems spokesperson did not respond to emailed queries, phone calls and WhatsApp messages. JTEKT Corporation also did not respond to emailed queries.
“The Japanese partner has offered a substantial premium as India offers much bigger opportunities in the auto- component sector. This proposed buyout is in line with the strategy of Japanese auto-component makers who are trying to consolidate their presence in India by buying out their local partners.These are mostly Maruti Suzuki vendors and similar deals will also take place in other auto-component joint ventures,” said a person familiar with the development.
Both sides are hoping to enter into a binding agreement by next month, added this person. This will be the second split between long-term Indian and Japanese partners in the automotive segment after Hero and Honda parted ways in 2010. Negotiations began in 2015 when Surinder Kapur was still at the helm of affairs. His sudden death in July 2015 delayed the negotiation for more than a year and discussions restarted in the second half of 2016.
The Indian promoter owns 25.28% of the joint venture company while the Japanese company owns 20.1%. Maruti Suzuki, which is a key customer of the company, owns 6.94% and the remaining stake is held by retail and institutional investors. After the completion of the deal, JTEKT will make an open offer for purchasing an additional 25% stake from existing investors under the takeover code.
Sona Koyo Steering Systems, the flagship company of the Sona Group, is one of the largest manufacturer of steering systems for the passenger car and utility vehicle market in India, catering to passenger cars, utility vehicles and light commercial vehicles. It was originally set up to provide steering systems to Maruti Suzuki but has diversified its customer base over the years.
JTEKT Corporation (formally known as Koyo Seiko Co Ltd) is the market leader in Japan and in the recent past announced a merger with Toyota Machine Works. Post this merger, JTEKT will become the world's largest steering systems manufacturer. Sona Koyo’s customers include major vehicle manufactures in India such as Maruti Suzuki, Toyota, Hyundai, Tata Motors, Mahindra & Mahindra, General Motors and Mahindra-Renault. Independently, as well as through its network of overseas joint venture partners, it exports high-quality precision products to USA, Europe and Japan.